In my previous blogs I have discussed the ins and outs of the GP Sustainability Loan scheme and have explained potential stumbling blocks on the road to a GP contractor receiving funds from the Health Board. Now, picture this scenario: the GP contractor has successfully negotiated all obstacles in their way and has now been paid out by the Health Board thus putting the GP premises in a more secure financial position. Let’s explore the ways in which a GP contractor can terminate the borrowing relationship with a Health Board.
There are three main ways to end the GP Sustainability Loan. A GP contractor can (1) repay the loan in full and thus discharge the standard security given to the Health Board, (2) the Health Board can write off the loan, or (3) the GP premises can be sold either by the GP contractor or potentially the Health Board.
Firstly, there is the option for the GP contractor to repay the GP Sustainability Loan in full at any time. It is quite unlikely that this will happen unless a GP contractor suddenly comes into a lot of money to discharge all of the borrowing that is registered against the premises. Remember that the GP Sustainability Loan would be the last borrowing to be paid off as it will be ranked behind other lenders and, as it is an interest free loan, there is probably not much incentive to pay this off promptly. However, even though it is an interest free loan, if the GP contractor breaches any terms of the loan agreement then interest will become payable at 6% above the Bank of England base rate.
The loan is also repayable if the GP contractor wishes to sell up or the premises is no longer used for the provision of primary medical services under a contract with a Health Board. If the premises are no longer being used for the permitted use under the loan conditions then the Health Board must agree to defer repayment on the loan for up to 12 months in order to allow the GP contractor to sell the property. If repayment has not taken place within the agreed period then the Health Board is entitled to sell the property as a secured lender. The Health Board is entitled to refuse to discharge its security on a sale if full repayment will not take place (unless a write-off is agreed).
In certain circumstances the loan (or part of it) could be written off by the Health Board. This includes the following situations:
- The Health Board is satisfied that the premises were placed on open market with proper marketing to sell them at maximum price achievable;
- The Health Board is satisfied, having taken professional advice, that an increased offer could not reasonably have been achieved;
- The Health Board is satisfied that the premises have not been sold to a person connected to the GP contractor; or
- The GP contractor did not deliberately increase its borrowings so as to enter negative equity in the period between the granting of the GP Sustainability Loan and the marketing of the property.
There is also an option for the Health Board to purchase the premises at any time based on a valuation by the District Valuer. The option to purchase will not be exercised if the purchase price is not sufficient to clear the GP contractor’s other secured debts and an arrangement cannot be reached with the GP contractor’s other secured lenders. However, it is noted in the GP Premises Code of Practice released by the Scottish Government that Health Boards will not start purchasing GP premises until 2038.
